Regulatory risk will be reduced and business confidence boosted by a change in the federal government, professional investors say, leading to stronger corporate profits and higher share prices.

Market participants are hoping for a majority government and a more certain outlook for policy after the federal election on September 7.

Altair Asset Management chief executive officer
Philip Parker
said the firm was underweight domestic equities “because policy under the current federal government has been bad for mining, bad for retail and bad for business".

Morningstar head of equities research
Peter Warnes
said business and consumer confidence would be restored by way of increased certainty and predictability in policy that a Coalition government would bring. But he said the federal government’s new levy on deposits would be passed on to consumers, and would not hurt banking stocks as hard as some believed, while s and so may not have as negative an impact on bank stocks as some feared“any yield stocks, including the banks and Telstra, will continue to be sought after". as superannuation funds and retirees push towards equities that have sustainable income

With both sides of government focused on bringing the federal budget back to surplus, fiscal cuts would dominate any government agenda, leading the Reserve Bank of Australia to maintain lower interest rates until a transition from mining to non-mining gained traction, AMP Capital portfolio manager
Nader Naeimi
said. This would benefit interest-rate sensitive stocks, including banks as well the housing and construction sector and consumer discretionary stocks.

“Less regulatory uncertainty and a lower Australian dollar will be positive," he said.

Equity Trustees chief investment officer
George Boubouras
said a majority government could contribute to an uptick in corporate earnings in fiscal 2014 and 2015. “We now have a definite election date and that’s a positive for corporate Australia because we have effectively been in a pseudo election campaign," Mr Boubouras said. “A majority in the lower house would be seen as a positive outcome for corporate Australia."

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He listed the shock introduction of the mining tax and carbon tax as examples where companies have been hit by regulatory changes.

More recently, a proposed change to fringe benefits tax concessions has hit the car industry, and the fate of salary packaging provider
McMillan Shakespeare
appears heavily reliant on the election result.

McMillan entered into a trading halt this month after the Labor government said it would remove the statutory method for salary-sacrificed and employer-provided car fringe benefits, where the benefit is the cost of the car multiplied by 20 per cent regardless of whether the car is for personal use.

McMillan’s earnings are heavily dependent on vehicle leasing and the stock plunged 43 per cent to $8.80 when it resumed trading last Thursday. Shares gained 5.5 per cent to close at $9.18 on Monday, the first session since Prime Minister
Kevin Rudd
announced the election.

Mr Parker said Altair Asset Management favoured companies earning offshore income as they were “earning hard currency on a rebounding US economy rather than a flagging local economy".